All You Need to Know about Donations Regulatory Law
What are donations?
Donations as stipulated by
Federal Law No. 3 of 2021 regulating donations, include collection of items of monetary value whether cash or in kind, transferred or fixed, including national currency, foreign exchange, bonds, cheques and shares, in any form, including electronic or digital, to be spent on charity or through charitable or humanitarian services and aids.
What is the purpose of issuing Donations Regulatory Law?
The Donations Regulatory Law is an important law in the UAE as it is mainly linked to giving, which is a prominent humanitarian and inherited charity culture in the UAE. As such, the Ministry of Community Development in coordination with relevant local authorities unified their efforts to issue the federal law which stipulates rules and regulations that safeguards donor contributions and protect them from any form of exploitation and ensure they reach the intended beneficiaries.
What are the Types of Donations?
The law defines donations as any collection of value whether cash or in kind, transferred or fixed, including national currency, foreign exchange, bonds, cheques and shares, in any form, including electronic or digital. The law also stipulates certain regulations concerning in kind, food and pharmaceutical donations in order to maintain the health and safety of beneficiaries.
What is the difference between licensed and authorized entities that regulate donations?
Licensed entities are charitable associations, federal, local, and non governmental organizations (NGO) established by laws, decrees or decisions to collect, receive, distribute or direct donations. Licensed entities have been established with charitable functions as their core operations.
Authorized entities, on the other hand, are not permitted to organize or act with the aim of collecting donations without receiving approval of the concerned authorities since collecting and distributing donations is not within their main scope of operations.
Normal persons are given authorization by the competent authority according to the provisions of the law. As such, they must obtain a permit from the designated authority in accordance with the regulations and conditions stipulated in the law and its executive by-laws.
Why have donations been limited to contribution through charitable associations?
Collecting, receiving, distributing and directing donations is an essential task of charitable associations; therefore they have extensive experience and potential to carry out such works with proper knowledge of regulatory procedures.
Is a normal person allowed to collect donations from the public?
A normal person is prohibited from collecting or accepting donations from the public due to the difficulty of monitoring and supervising them whether in terms of monitoring the sources of collecting donations or the beneficiaries; thereof to avoid fraud or exploitation.
What are the methods of collecting donations?
Licensed or authorized entities may collect donations through:
- Text messages
- Donation collection boxes
- Bank account numbers on websites and email accounts of the entity
Does the law regulate donations made between members of the same family?
Charitable and humanitarian work is at the core of the UAE culture and is a characteristic of the Emirati society. Support and assistance can be provided within families or neighborhood communities under condition that the name of the beneficiary is declared and reasons for eligibility are mentioned. The above is true as long as the collection has not been announced through social media, media or to the public.
Is it allowed to collect funds from relatives and friends for the purpose of donation to charities outside the UAE?
To organize or act with the aim of collecting donations, one needs approval and permission from the competent authorities in accordance with certain regulations and conditions. The donations that are not included within the law are referred to those among family members to help some cases. The purpose of the law is to regulate collection of donations systematically and orderly.
Why did the law include deductions of collected donation amounts?
Entities which collect and distribute donations have an operational and running cost; the process of collecting donations needs financial, IT and human resources that are necessary for implementation. Licensed entities including charitable associations do NOT aim for profit, therefore, the law clearly states that certain proportions of allocated donations are deducted to cover operational expenses. As such, the executive regulations of the law determine and regulate these ratios while supervision and follow-up from the competent authority concerning compliance to procedures are specific to this regard.
Why does the law prohibit donation amounts to be used in financial speculation or revenue distribution among members or employees of licensed and authorized entities?
According to the law, the main purpose of regulating funds is to protect the donors and maintain the integrity of collected donations through defined regulations and specified procedures including the deducted administrative and operational expenses. The law prohibits those funds to be used in financial speculation or revenue distribution or among the members and staff.
Can the collected in-kind donations be transferred into cash? And why?
The law allows the transfer of in-kind donations into cash when necessary, according to certain regulatory conditions to maintain these donations from damage or decrease their non-usage value and benefit from their cash value to be disbursed to charitable and humanitarian banks. For example, the entity may receive in-kind donations in larger quantities than required, and therefore may transfer those donations into cash to benefit from their value.
After obtaining approval from the designated authority, the transfer process is monitored, in accordance with the procedures and set process by the executive regulations of this law.
What is the penalty for violators of the Donations Regulatory Law?
A penalty of imprisonment and a minimum fine of 200,000 AED dirhams and maximum of 500,000 AED or one of those penalties imposed on whoever collects or receives donations, grants or subsidies from any person or entity outside the UAE, unless in compliance with the regulations and procedures stipulated by the law. The penalty or fine is doubled in the case of recurrence.
Penalty of imprisonment and a fine of minimum 200,000 AED dirhams and maximum of 500,000 AED towards whoever trades in donated funds or engaged in financial speculation, or the distribution of revenues among the members or employees of the associations, whereas the penalty or fine is doubled in the case of recurrence.
Penalty of imprisonment and a minimum fine of 200,000 AED dirhams and maximum of 500,000 AED or one of those penalties imposed on whoever commits any act while collecting, accepting or making donations that may harm public order, national security, public morals, any act that may encourage sectarian, ethnic, racial, religious, or cultural disputes, or any illegal purpose according to the enforced legal legislations in the UAE, whereas the penalty or fine is doubled in the case of recurrence.
In all cases, the court shall order the confiscation of all collected donations or donation amounts in violation of the provision of this law.
Is it allowed to change the beneficiary or the purpose of the donation?
In general, donations must be provided to the beneficiaries or disbursed for specified purposes as defined by permit, however, the law allows the chairman of the designated authority to be granted permission to identify beneficiaries or other purposes for such donations, if they cannot be presented to beneficiaries or spent on the purposes specified in the permit.
Are there any penalties or punishments in which the donated funds were used for other purposes other than they were collected for?
Article (36/2) of the law states that a penalty of imprisonment and a minimum fine of 150,000 AED and maximum of 300,000 AED or one of those penalties, for the usage of collected donations for purposes other than those listed in collection, whereas the penalty or fine is doubled in the case of recurrence.
Why have collected in-kind and pharmaceutical donations been specified in the law?
The UAE law stipulates a set of conditions and regulations concerning in-kind food or pharmaceutical donations that are provided either inside or outside the UAE. The law states that these donations must not violate the enforced UAE legislations and regulations, and their validity may not exceed (6) months if provided outside the UAE. The purpose of the UAE law is to maintain the health and safety of beneficiaries, and ensure donations reach the intended beneficiaries valid for usage.
Are there any obligations of charitable associations towards authorized entities?
As part of the UAE legislative efforts to organize the donation collection process through charitable associations only, it enforces a set of obligations on those associations towards the authorized entities as specified in article (24) of the law, including (compliance with the conditions and regulations of the permit, providing authorized entities with regular reports on the collection process, and handing over the proceeds of the collected donations to authorized entities within a period of not exceeding (30) days of the expiry date of the permit to ensure that this process is carried out within a clear and specific regulatory framework.
Does the donation collection permit expire?
The law specifies a range of cases in which the donation collection permit expires, such as: expiry date of the permit, end of the purpose for which it was issued, or demise of the legal personality known to the authorized entity or charitable association responsible of the collection process.
What are the regulations and procedures for receiving donations from outside the UAE?
The organizing process of collecting or receiving donations from outside the UAE is one of the priorities of the Federal Donations Regulatory Law since it maintains the reputation and UAE rank globally and prevents abusing of such donations in illegal activities or projects. The designated authority must be fully aware of the source and purpose of these donations.
What if a bank account carries donations that violate the law? How does the competent authority deal with these accounts?
Article (16) of the law stipulates that the executive regulations specify certain rules and regulations to close the bank account which deposit donation amounts that violate the law. Section (4) of Article (36) states that the court shall confiscate the collected donations in violation of the provisions of the law.
Are there any requirements and conditions for delivering and making donations outside the country? What is the purpose?
The executive regulations of the law stipulate certain conditions and requirements for the delivery of donations outside the UAE, these regulations must ensure that the donations are provided to the beneficiaries or disbursed for their specific purposes, and UAE legislators aims to establish regulations and procedures to protect the donor funds, ensure they reach beneficiaries adequately and are not exploited in financing any illegal organization or activity.
Are there any specific restrictions on external remittances from donation accounts?
The law stipulates certain regulations and procedures for bank transfers outside the UAE from donation accounts, the executive regulations of the law will include details of these regulations and procedures in coordination with relevant authorities in the UAE.
Donation Permit Suspension
The donation permit shall be suspended if the charitable association or authorized entity violates the terms and conditions of the permit by the designated authority.